Tuesday, 25 February 2014

UFile Tax Software Giveaway!

It's tax season and those receipts should be flowing into your inbox or mailbox. Here's an opportunity for blog readers to ease some of the hassle of doing taxes by taking advantage of a giveaway from one of the leading tax software providers. The software will let you prepare and file online electronically on Canada Revenue Agency's NETFILE tax submission service

Thanks to UFile, I am giving away five codes for the online web version of their personal tax preparation software for Canadians. That's a value of $15.95.

Here are the details of the giveaway:
  • To enter, submit a comment on this post below - Though you don't have to, I'd be interested in your comments on tax prep software since I am again working on my annual review of all the CRA NETFILE certified packages; use a unique name (Anonymous won't suffice!) so I can distinguish people
  • One entry per person please
  • Entries close Tuesday, March 4th midnight EST
  • I'll do a random draw of five (5) names from amongst the entries after the deadline
  • Winners will be announced on the blog and asked to contact me via email with their own email address so I can reply with the code to enter in the UFile tax software (your email will not be used for any purpose other than to contact you as a winner)
Good luck! 

Tax Havens - the pot calling the kettle black

When it comes to preventing tax avoidance or evasion, it seems that many countries apply the principle that while making sure collection of their own taxes is high priority, enabling other countries to collect their own doesn't matter so much. The degree of secrecy taken together with the scale of activity in each country make for some surprises in the Financial Secrecy Index ranking of world countries by the Tax Justice Network.

Achetype tax havens like the Cayman Islands are high (#4) on the list for sure but it is refined, reserved Switzerland in top spot. Nipping at the Cayman's heels, ahead of Bermuda, Panama and Jersey, is the good ole USA in #6 spot! Why? Because while it is fanatical about collecting its own taxes, it doesn't bother nearly as much in helping other countries collect theirs. #17 Canada sins that way too, if one reads the linked country report, backed up by very detailed database info.

Let he who is without sin etc.

Monday, 24 February 2014

CP Rail vs CN Rail - Pricing in perfection?

Ever since the big shareholder battle and the installation of Hunter Harrison as CEO of CP Rail (TSX: CP), CP stock has been on tear, with returns far outstripping those of rival CN (CNR). Is this justified, should I be riding the rails with CP instead of my well-established holding in CN?

The short answer is, I don't think so. It sure looks like CP shareholders are fully paying in advance for business improvements that meet or exceed present performance of CN, which is termed the best-run railway in North America. No doubt tremendous improvements are taking hold at CP, as evidenced by CP's most recent quarterly results.

But the numbers below, which include the latest results despite some sources that have not yet updated their databases weeks after the results were released (I ignored those), say to me that CP still has a lot of catching up to do. CN is green / better almost everywhere, except for profit improvement.

Management is getting richly rewarded for the job they are supposed to carry out in future. The cart is before the horse. Named Executive Officer (which includes CEO Harrison and the other top execs) pay is up enormously since the doldrum years of 2007 and is now a much bigger slice of the pie than at CN. It's not just Harrison receiving platinum compensation, it's all the execs. CP's execs are about 85% over-paid. It's like paying one of your kids more to clean her room when another kid doesn't get anything because her room is already clean.

Business performance measures still lag CN's by a lot. Whether you look at ROE, ROA, Operating or Net Margins, Operating Ratio, Revenue per employee (and different data sources give frustratingly different numbers for the supposed same metric), CN is still far ahead of CP. CP is also more levered / riskier with its higher debt load.

Valuation of CN is much less rich than CP. The ratio of market Price to present Earnings, Book Value, Sales, Cash Flow or EV to EBITDA, all point to a cheaper CN. There is evidently an expectation of significant improvements to come at CP. How much improvement is expected? It looks like pretty much complete catch up to CP, as suggested by the highlighted cells. Expectations of sales growth are not be the source of CP's potential advance, it is all in profitability gains, as analyst Sales and Earnings estimates testify. But CN isn't standing still, it has been increasing dividends steadily and is still much ahead of CP's and it is forecast to grow Sales and Earnings.

The overall combination of various sources on analyst recommendations seems to indicate CP more over-valued than CN. Blogger Sylvia Brunner's more thorough run-through of CN's numbers concludes that CN itself is on the pricey side.

But like her I will continue to hold it. Good luck to CP shareholders. Here's hoping all goes perfectly according to plan as you seem to expect. Meantime, for CEO Harrison congrats on picking a nice bet - heads, you win and tails, you win too!

Saturday, 22 February 2014

An Investor's lament - crap data everywhere

I've just been trying to do a quick comparison of CP Rail with CN Rail. Gather a few key financial numbers and start thinking and writing. Alas, such a simple task is frustratingly difficult with various data sources, some of them paid subscription, that don't agree with each other, or are just plain wrong, or unforgivably out of date:

  • EPS estimate dispersion (high vs low analyst estimate for next financial year), a useful measure of a stock's riskiness - Yahoo Finance Canada has 10.7% for CP but my broker BMOIL has it at 6.3%; for CNR it's much closer - 12.1% vs 11.8%, respectively. Who's right? Is it just a different set of brokers?
  • CP year-end results - the release came out on January 29th, yet more than three weeks later, these results are not yet available in BMOIL (which gets its data from GlobeInvestor Gold) or Morningstar Canada (which I happen to pay for!). Yet the free TMX Money, Yahoo Finance Canada and most curiously Globe Investor WatchList, do have year-end results.
  • CNR per share data - last November the stock split 2 for 1 and most data sources have adjusted prior years to make data comparable ... that is except for TMX Money on this table. Grrrr
  • Return on Assets - one would think that such a straightforward traditional ratio could be the same whatever data source, if one is careful to look for the same time period, like trailing twelve months or financial year and when the latest quarterly updates have been done. That thinking would be foolishly wrong, however. Here are the variations on this ratio for CNR - Yahoo Finance 8.52%, Morningstar 9.19%, BMOIL 13.89%. Just great, that's a big spread, who's right? It's back to the company 2013 year-end release: Net Income $2612M / Assets $30163 = 8.66% i.e. none of the above. I've noticed that ratios are especially problematic - none of the providers ever define how their particular version is calculated so the only hope is to use one provider for each ratio to compare across companies or through time. Or, to do the figures yourself, but that gets very time consuming.
Investors can be forgiven for giving up and buying broad index ETFs.

Thursday, 20 February 2014

Canadian Government to Stop Paying Cheques!

Once in a while, it's fun to imitate those cheeky deceptive headlines. No, the federal government is not having a debt ceiling crisis and government operational shutdown such as the USA had in 2013. Nope, it's just that as of April 1st 2016 (no, it's not an April Fool's joke) the government will only pay by direct deposit. No more paper cheques. Which is a good thing all round. The government / taxpayers save money and it's a lot more convenient for payment recipients as the government publicity that I received states:
"Direct deposit is:

Fast. The money is guaranteed to be in your bank account on time. That’s especially important if you have arranged automatic withdrawals to pay rent, property taxes, hydro, etc.

Secure. There’s no risk of your payment being delayed, misplaced, lost, stolen, or damaged.

Convenient. The money is in your account when needed even if you’re away from home on a holiday or unable – for any reason – to get to the bank right away.

A timesaver. There’s no need to adjust your schedule (picking up the kids, attending classes, visiting the doctor, etc.) to accommodate banking hours and there’s no need to wait in line for a teller or ATM either."

It's possible to enrol for direct deposit online:
http://www.servicecanada.gc.ca/eng/sc/direct-deposit/index.shtml for CPP, unemployment, Child Tax Benefit
- http://www.veterans.gc.ca/eng/services/resources/direct-deposit for its various payments, though here you still have to print and mail in a paper form.

As someone who spends a lot of time out of the country, I've long been a fan of direct deposit and any form of electronic payment. I only wish Canada's banking system had the equivalent of the UK's Faster Payments system, which since 2007 (!) allows anyone to make more or less instantaneous payments and transfers to businesses or individuals.

Update: here is graphic from the government's publicity people showing the various other ways to sign up.

Wednesday, 19 February 2014

TurboTax Software Giveaway Winners!

The random draw for the TurboTax web version has been done and the three winners are:

  • Pat
  • IG
  • Jeff MacDonnell
Would these lucky winners please contact me by the email link in the right hand column of this blog page so that I can send you the access code. Congratulations!

Thursday, 13 February 2014

Why the delay CRA? NETFILE software certification still on-going!?

The Canada Revenue Agency NETFILE service has been officially open to receive 2013 tax returns since this past Monday February 10th. Yet only a handful of packages have completed the certification process. Today, for the first time there is a list of packages "in process" to at least let people know which are likely to get certified. Still, it's quite shocking that things are so late, especially since CRA is promoting online instead of paper filing. I cannot imagine that all those software companies, including the biggies TurboTax and UFile, have been sitting on their hands. So what gives CRA? Will the April 30th tax submission deadline will be extended to compensate?

Tuesday, 11 February 2014

TurboTax Online Income Tax Software Free Giveaway!

Now that the Canada Revenue Agency's NETFILE online tax submission service is open for business, it's time to start thinking of preparing a tax return for 2013 even though the deadline for submission is a distant April 30. 

Thanks to TurboTax, I am giving away three codes for any online web version of their personal tax preparation software for Canadians. That's a value of $17.99 for the Standard version on up to $44.99 for the Home and Business version for contractors and consultants.

Here are the details of the giveaway:
  • To enter submit a comment on this post below - though you don't have to, I'd be interested in your comments on tax prep software since I am again working on my annual review of all the CRA NETFILE certified packages; use a unique name (Anonymous won't suffice!) so I can distinguish people
  • One entry per person please
  • Entries close Tuesday, February 18th midnight EST
  • I'll do a random draw of three (3) names from amongst the entries after the deadline
  • Winners will be announced on the blog and asked to contact me via email with their own email address so I can reply with the code to enter in the TurboTax tax software (your email will not be used for any purpose other than to contact you as a winner)
Good luck! 

Monday, 10 February 2014

Dissecting a phishing scam email

Check out out this email I received today from a friend whose email account has evidently been hijacked:

How are you doing? I am sorry for reaching you rather too late due to the situation of things right now..I'm stranded in Manila(Philippines) and had my bag stolen from me with my passport, mobile phone and personal effects therein. It was a terrible experience for me thank God the embassy has just issued me a temporary passport but I have to pay for a ticket and settle my hotel bills with the Manager before leaving.

I have made contact with my bank but it would take me 3-5 working days to access funds in my account, the bad news is my flight will be leaving very soon and but i am having problems settling the hotel bills. Please let me know if i can count on you i promise to refund the money back as soon as i get back home



The smelly details that aren't quite right:
1) "Hello" - only that, not my name? of course, that makes for easy mass mailing to lots of people on Dianne's email log. The whole lack of detail in the message (no hotel named, no dates, etc) is too deliberately vague.
2) "How are you doing?" That's a rather calm tone for the story that follows.
3) "... due to the situation of things ..." Dianne is more literate than that. Lack of other punctuation looks rather suspicious for someone who is a communications professional.
4) If she was in contact with the Embassy then she would also have been in contact with family who certainly could have provided assistance. Besides, I would be surprised if Dianne would travel alone.

In fact Gmail spotted the scam attempt too and there was a big red warning banner across the message. Even the computer knows better. So, sorry "Dianne", I won't be sending any money today.

Thursday, 6 February 2014

Canadian Personal Finance blogs poll

Jeremy at Modest Money is conducting his annual vote for readers' favorite personal finance blog, which flatteringly includes this blog. Have a look at the long list of blogs for more reading pleasure and by all means give this blog a pat on the back with a click vote.

Monday, 3 February 2014

The asset allocation difference between professional investors and ordinary investors

Pension & Investments shows us what happens to asset allocation choices , reproduced below, when professional investors manage Defined Benefit pension plans versus ordinary investors doing it in Defined Contribution plans in the latest update for the largest US-based plans.
It's a dramatic difference:
  • though the total allocation to stocks is pretty much the same, ordinary investors in DC plans have a much heavier weighting in domestic stocks - the potential for international diversification is much under-exploited
  • pure fixed income seems to be much neglected by ordinary investors; instead there are huge dollops in DC plans of something odd and undefined (that I could find at least) called Stable value and the synthetic Target date funds.
  • professional investors in DB plans take advantage of Private equity and Alternative investments, which ordinary investors cannot do easily, if at all
  • the DC plans of ordinary investors have large piles of un-productive, idle cash, which the pros don't
  • real estate is absent from DC plans of ordinary investors, again a missed diversification opportunity
This sure looks like an example of the oft-stated idea that ordinary investors don't do as good a job as the professionals. However, it's not inevitable. Ultra-simple basic portfolios of broad market funds, requiring only annual rebalancing maintenance, that give a pretty good result are easy to specify (e.g. Simple Portfolios or a Canadian version of famous pro investor David Swenson's model on my other blog HowToInvestOnline). Most ordinary people I suspect just don't pay any attention and don't bother to learn even the most basic principles of investing. It seems odd when so much is at stake.

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